Amidst the rapidly growing electric vehicle (EV) market, a little-known clause in the US Inflation Reduction Act (IRA) is catalyzing a recycling revolution in North America. This clause, which automatically designates EV battery materials recycled in the US as American-made for subsidies, is incentivizing automakers to embrace recycling efforts and reshaping the global dynamics of EV battery recycling. As a result, North America is now at the forefront of the race to challenge China’s dominance in this crucial industry.
The Significance of the IRA Clause
The IRA’s provision bestows special privileges on automakers that utilize US-recycled battery materials for their EV production, granting them access to lucrative incentives. This has led to a surge in US factory constructions and an increased focus on developing recyclable batteries. Furthermore, it is poised to potentially restrict the availability of used EVs in developing countries in the future.
China currently handles a vast majority of the global EV battery recycling market, which is projected to grow from $11 billion in 2022 to $18 billion by 2028, according to research firm EMR. As more EVs are introduced and reach the end of their lifespan, the demand for battery recycling will skyrocket, underscoring the significance of this clause in the IRA.
The Valuable Minerals in EV Batteries
The minerals found in EV batteries, such as lithium, cobalt, and nickel, hold substantial economic value. BMW’s sustainability chief, Thomas Becker, estimated that these materials are worth between 1,000 to 2,000 euros ($1,123 to $2,246) per car. As the production of EVs surges, the demand for these minerals is likely to exceed supply in the coming years.
Fortunately, these valuable minerals can be recycled indefinitely without losing their power, providing a promising solution to potential shortages. This revelation has driven companies like Canadian battery recycling firm Li-Cycle and Redwood Materials to accelerate their recycling efforts.
US Leads the Charge on Recycling Efforts
With the IRA’s “urban mined” designation for recycled battery materials, US companies have a powerful incentive to invest in recycling infrastructure. This has enabled the US to take the lead over the European Union, which has primarily focused on implementing mandates for recycled materials in future EV batteries.
The investment support from the US government, exemplified by Li-Cycle’s $375 million loan and Redwood Materials’ $2 billion loan, has facilitated the rapid construction of battery recycling plants in the US. Notably, Li-Cycle has already opened a recycling plant in Georgia and plans to establish another in Kentucky by late 2023.
Global Growth and Potential Impact
The growth of EV battery recycling is evident globally, with at least 80 companies engaged in recycling and over 50 startups attracting substantial investments from various corporate entities. Circular Energy Storage predicts that the volume of available EV batteries for recycling will increase more than tenfold by 2030, from 11.3 Gigawatt hours (GWh) in 2022 to 138 GWh in 2030, equivalent to approximately 1.5 million EVs.
The rapid expansion of the EV recycling industry has the potential to transform the automotive sector significantly. Industry officials project that by 2040, up to 40% of battery materials used in new EVs could come from recycled sources, contributing to a more sustainable and environmentally friendly EV ecosystem.
Challenges Ahead
While the growth of recycling efforts presents numerous benefits, challenges remain. Currently, there is limited recycling capacity in both the US and Europe, and finding old EVs for recycling poses an issue, especially when a significant number of fossil-fuel cars disappear overseas. Moreover, as the EU mandates minimum amounts of recycled materials in EV batteries within eight years, the pressure to improve recycling yields will intensify.
Conclusion
With the growth of closed-loop supply chains and the potential for significant economic gains, the recycling revolution promises a greener, more self-reliant future for the EV industry. However, addressing challenges in recycling capacity and maintaining control over old EVs will be crucial in ensuring long-term success. As the recycling industry evolves, it will be fascinating to witness how this transformative movement shapes the future of electric mobility worldwide.
